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Is Seattle’s Tax on the Rich Violating the State Constitution?

by | Jul 18, 2017 | Taxes

TESS LYNNE

Seattle’s city council just passed an income tax hike on the wealthier citizens that opponents call a clear violation of the state’s constitution. Last week, the council agreed to raise the individual income tax from 2% to 2.25% on residents earning more than $240,000 annually, or $500,000 for joint filers. According to the state constitution, the critics are right.

Washington state’s constitution declares that “all taxes shall be uniform upon the same class of property.” Individual income is considered property, according to three Washington Supreme Court decisions; therefore the tax increase is a clear violation of the law.

Jason Mercier, director of the Center for Government Reform at the Washington Policy Center, said, “the city has to have a grant of authority from the state to impose any tax.” It doesn’t. Additionally, a 1984 state statute says; “A county, city, or city-county shall not levy a tax on net income.”

Seattle Mayor Ed Murry said in a statement that the city is “challenging this state’s antiquated and unsustainable tax structure by passing a progressive income tax,” which he calls a “new formula for fairness.”

However, council members decided not to put the vote to the people and instead made it a law on their own. A similar attempt happened last year at the city’s capital, Olympia, but failed. Freedom Foundation CEO Tom McCabe published a fundraising letter to gather support to fight the proposed tax hike. In his correspondence, Don’t feed the bears, he warns the public that this attempt to raise taxes in one city will become like a plague and spread to the rest of the state:

The ultimate goal of the Olympia income taxers is to con enough people in a test city to enact a local income tax. Their hope is that the Washington Supreme Court will then reverse 80 years of precedent and approve the tax, opening the way to a statewide income tax that does not require approval by those pesky voters.

The state’s tax system is considered the most regressive in the country, with the people earning lower incomes paying a higher percentage of their earnings. Currently, neither the state nor any of its cities collect an income tax. The legislation, sponsored by Councilmembers Lisa Herbold and Kshama Sawant, would allegedly provide funding from the taxes gathered to address issues such as homelessness, education, transit and aid in affordable housing.

The move to raise taxes started in February from a Trump Proof Seattle campaign as a response to the threat of Seattle losing federal funding under President Donald Trump’s initiative to halt federal grants to Sanctuary cities. The campaign sought to raise taxes on the wealthy to make it easier on the less fortunate.

A member of the Socialist Alternative Party, Sawant was quick to take up the gauntlet and run with it. No stranger to the streets of Seattle and the public eye, she has been one of the most aggressive spokespersons for progressive movements and politics. Most recently, the council member took heat after practically inciting people to riot on Inauguration Day. While she didn’t explicitly throw out a call to riot on the streets against the newly elected president, she did strongly encourage residents to take a stand and be heard, which caused major traffic jams and obstructed patronage to local businesses. She, along with Mayor Murray, has been busy passing progressive policies including the minimum wage hike to $15, a soda tax and a “secure scheduling” ordinance which requires businesses to set employee schedules weeks in advance or else suffer a penalty.

Reason warns these progressive movements will be more harmful than beneficial:

But these progressive policies tend to have harsh regressive effects. The minimum wage will eliminate jobs, “secure scheduling” will probably bring cuts in hours, and the soda tax will raise the cost of living… the new tax law does nothing to actually lower the burden of property and sales taxes on lowe-r and middle-income Seattleites. It just layers a new levy on top of the others.

When asked about the legality of the new tax by Progressive Army, Sawant said: “History shows that unjust laws need to be overturned and the only way to succeed is for ordinary people to build mass movements.”

According to the city, the tax will raise approximately $125 million a year but will cost between $10 million and $13 million to put together, and another $5 million to $6 million to maintain.  At the expense of nearly $3 million per year, the city will need to hire about twenty staff members to work the IT systems and taxpayer information center, and another twenty to twenty-five employees to enforce the new tax law.

The new tax law is bound to cause more issues for the already overburdened middle-class in an area with an exorbitant cost of living. And Seattleites will not be the only ones to suffer. The trickle-down effect will rear its ugly head to the Greater Seattle area, and potentially, if other cities follow suit, throughout the entire state.

Washington has one of, if not the highest costs for real-estate. Seattle Times reported in March that “For the fifth straight month, Greater Seattle has registered the sharpest home-price increases of any major market in the country, as home costs soared at their fastest pace in three years.” To get an idea of the soaring price of property, the Times said the median single-family home price in February was $67,000 in Seattle and $832,000 on the Eastside. And, to make matters worse, according to Puget Sound Business Journal, “Seattle renters need a raise of $1,248 every year [to] keep pace with rising rents.”

Washington State Republican Party chair Susan Hutchison urged Seattle residents to “forcefully resist the tax” by refusing to pay it. But with a city known for its progressive agenda, want and ability to protest about anything at the drop of a hat, and council members who don’t seem to care about causing a riot on the streets, the council’s decision to install this new tax law should not come as a surprise to anyone. Whether it holds up in court, which is where this bit of legislation is likely to end up, is another story.

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